Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the Legislature. LFC does not assume responsibility for the accuracy of these reports if they
are used for other purposes.
F I S C A L I M P A C T R E P O R T
SPONSOR
Sens. Wirth, Stefanics, and Ramos/Reps.
Vincent and Gonzales
LAST UPDATED
ORIGINAL DATE 2/05/2024
SHORT TITLE
New Mexico Property Insurance Program
Association Board
BILL
NUMBER Senate Bill 81/ec
ANALYST Rodriguez
APPROPRIATION*
(dollars in thousands)
FY25 FY26
Recurring or
Nonrecurring
Fund
Affected
$50,000.0 Nonrecurring General Fund
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
OSI
No fiscal
impact
$1,000.0 $1,00 0.0 $2,000.0 Recurring
Other state
funds
OSI
No fiscal
impact
Up to $9,000.0 Up to $9,000.0
Up to
$18,000.0
Recurring General Fund
Total
No fiscal
impact
Up to
$10,000.0
Up to
$10,000.0
Up to
$20,000.0
Recurring
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Relates to Senate Bill 33 and House Bill 175
Sources of Information
LFC Files
Agency Analysis Received From
Office of Superintendent of Insurance (OSI) Energy, Minerals and Natural Resources Department (EMNRD)
Agency Analysis was Solicited but Not Received From
New Mexico Office of Attorney General (NMAG)
SUMMARY
Synopsis of Senate Bill 81
Senate Bill 81 (SB81) appropriates $50 million from the general fund to the Office of
Superintendent of Insurance (OSI) to administer the Fair Access to Insurance Requirements
(FAIR) Plan Act and fire mitigation program. SB81 creates the New Mexico Property Insurance
Program Association Board as the governing body of the New Mexico Property Insurance Senate Bill 81/ec – Page 2
Program to administer the FAIR plan. SB81 directs the board to establish a FAIR plan, submit a
plan of operation to the superintendent, identifies board membership, specifies coverage limits,
provides enforcement language, specifies collection of member fees, and requires annual report
to the superintendent.
This bill contains an emergency clause and would become effective immediately on signature by
the governor.
FISCAL IMPLICATIONS
The appropriation of $50 million contained in this bill is a nonrecurring expense to the general
fund. Any unexpended or unencumbered balance remaining at the end of FY26 shall revert to the
general fund. Although SB81 does not specify future appropriations, establishing a new grant
program could create an expectation that the program will continue in future fiscal years;
therefore, this analysis captures an additional $9 million per year starting FY27 to support
ongoing mitigation efforts and ongoing operational costs for OSI.
OSI indicates that the requested appropriation includes $1 million for operational costs, $9
million for mitigation grants, and $40 million for a financial backstop for the FAIR plan in case
of catastrophic loss in the short term.
For operational costs, the OSI indicates that SB81 would require programming revisions to the
FAIR’s plan administration system and that additional FAIR plan staff would be required to
underwrite the additional policies and services the additional claims volume. The agency
estimates that the reoccurring costs would be $650 thousand, but that costs for FY26 would be
covered by the $50 million appropriation. OSI also indicates the agency would require 3 FTE to
manage the mitigation grant program. OSI estimates that the reoccurring costs would be $350
thousand, but that costs for FY26 would be covered by the $50 million appropriation. This
analysis assumes both of these costs to recur in future years.
Finally, the LFC assumes that OSI would continue to award mitigation grants after FY26. The
fiscal impact of $9 million, covered by the appropriation in FY26, would recur in FY27.
SIGNIFICANT ISSUES
New Mexico FAIR Plan.
The New Mexico Property Insurance Program is the underwriting
association of the New Mexico FAIR plan. The New Mexico FAIR Plan Act, contained in
Article 59A-29 et. seq. NMSA 1978 of the New Mexico Insurance Code, was enacted by the
Legislature to provide essential property insurance to responsible and qualified applicants in
New Mexico who are unable to secure such insurance in the normal market, acting essentially as
the provider of last resort and providing minimal coverage. Unlike normal coverage, the plan
only covers actual cash value, or the depreciated value of the property. However, certain lenders,
like Fannie Mae, do accept this plan as creditable coverage to meet mortgage requirements.
Currently under the FAIR Plan Act, all insurers licensed to write essential property insurance are
required to establish and maintain the FAIR plan and an underwriting association. The
underwriting association is responsible for assessing and sharing all expenses, income, and losses
of the FAIR plan—meaning the financial burden of providing insurance to high-risk individuals Senate Bill 81/ec – Page 3
is distributed among all participating insurers rather than being shouldered by one company
alone.
Roles and Responsibilities. Currently, the New Mexico FAIR plan and program are subject to
approval and regulation by OSI. SB81 amends the FAIR Plan Act to give the superintendent
explicit authority and mandatory duty to direct property insurers to establish and maintain a
FAIR plan and underwriting association, as opposed to the superintendent having oversight to
approve and regulate action, as is currently in statute.
SB81 also creates and establishes the New Mexico Property Insurance Program Association
Board as the governing body of the New Mexico Property Insurance Program. The board
includes nine appointed members to represent the interest of reinsurance companies, consumers,
property and sultry insurers, product management, and catastrophic risk management and with
experience in actuarial science and climate science, and the superintendent or their designee. In
SB81, the board is responsible for establishing a FAIR plan, submitting a plan of operation to the
superintendent, amending the plan and articles of association, collecting member fees, and
reporting to the superintendent. In current statute, many of these duties are handled by the
underwriting association.
SB81 requires the plan of operation prepared by the board to include the types of insurance that
will be offered, risk or damages that will be covered, rules for deciding who qualifies for
coverage (including mitigation requirements and property inspections), payments and
commissions for member companies, and time frame for fee collections. SB81 also specifies that
the plan’s premium rates cannot be excessive or inadequate, must generate enough revenue to
cover losses, consider investment income, and account for reinsurance or other risk transfer
costs.
OSI suggests adding the following amendment to address anti-donation issues:
The amendment proposed in Section 3 to be expanded to add the following sentence at
the end of Section 59A-29-2: The Association is a non-profit unincorporated public
entity.
Coverage through the FAIR Plan. SB81 requires that coverage limits are:
Up to $1 million for residential property,
Up to $5 million for each commercial property, and
A total policy limit of $10 million for commercial properties.
Currently, coverage limits are dictated by bylaws created by the New Mexico Property Insurance
Program, or the underwriting association. Currently, the maximum coverage available is $350
thousand on residential and $1 million on commercial structures.
Enforcement. SB81 adds enforcement language to the act. If an insurance company does not
pay its required fees or follow the rules, the bill allows the superintendent to hold a hearing and
then either suspend or revoke the company's license to operate in the state or impose a fine of
either the amount of the assessment owed, plus interest and the cost of enforcement, or a flat fee
of $5 thousand.
Assessment of Fees. SB81 directs the proposed board to collect fees from member insurers for Senate Bill 81/ec – Page 4
the program to remain solvent. The bill allows insurance companies to pass the fee on to
policyholders as a surcharge, which can be spread out over three years, but does not allow them
to raise premiums because of the fee. The bill also allows the board to delay or reduce a fee for a
company if the fee threatens their solvency.
Home Insurance in New Mexico. Between 2020 and 2023, home insurance premiums in New
Mexico rose by an average of 16 percent, which is lower than the national average increase of 33
percent. However, the increases varied significantly, ranging from 7.3 percent to 47.4 percent.
The average New Mexico household paid $1,817 in home insurance premiums in 2023, 28
percent lower than the national average of $2,530. Based on 2021 data from the National
Association of Insurance Commissioners, the property and casualty insurance industry’s average
loss ratio in New Mexico was 59.4 percent. Loss ratio is the percentage of premiums paid out as
claims and is calculated by dividing the total amount of insurance claims by the total amount of
premiums earned. The ideal loss ratio generally falls between 40 to 60 percent. For the most part,
insurers are still making a profit in New Mexico, despite losses in 2016, 2017, and 2022.
Mitigation. Although not explicit in SB81, OSI indicates that meeting Insurance Institute for
Business & Home Safety (IBHS) Wildfire Prepared Home standards would be mandatory to
remain in the FAIR plan. The agency notes that $9 million of the $50 million appropriation
would be for mitigation grants to provide assistance for property owners who require assistance
to meet IBHS standards. OSI notes:
The cost to mitigate a residence to meet IBHS wildfire prepared home standards is
estimated to cost $7 thousand per property. If OSI would provide grants to 25 percent of
projected policyholders [due to the changes proposed in SB81], the total mitigation costs
are estimated at $9M.
As noted by the agency in their analysis, the Energy, Minerals and Natural Resources
Department (EMNRD) Forestry Division is directed in Chapter 68-2-34 NMSA to staff the Fire
Planning Task Force that is charged with developing mitigation requirements.
Financial Backstop. OSI notes that additional policies and coverage limits that could result
from SB81 correlate to additional exposure to the plan. The agency plans to utilize $40 million
from the requested appropriation to minimize the need for additional assessments in case of
losses due to SB81. The agency notes:
Additional policies correlate with additional exposure to catastrophic loss. While
significant losses in the FAIR Plan would be funded through industry assessments, OSI
seeks to minimize initial industry assessments to encourage carriers to continue to offer
property insurance in the open market. If an assessment becomes necessary, the
recommended FAIR Plan would propose to allow industry to add a surcharge to open
market policies to allow for the recovery of the assessment in equal amounts over a three-
year period.
Based on projected policy counts, average home values by county, and the damage
resulting from the 2024 South Fork and Salt Fires, an expanded FAIR Plan could be
expected to be exposed to the additional catastrophic wildfire losses as shown in the [fifth
column in the chart below]. The total estimated cost of these losses (excluding the
counties with less than 50 policies today) is $40 million.
The requested $40 million would be used to create a financial reserve to pay claims in the Senate Bill 81/ec – Page 5
event the estimated losses actually occur. The funds could also be used to purchase
reinsurance to mitigate industry assessments. Accrued interest should be credited to the
fund. The fund would be a continuing, non-reverting fund.
OSI provides the following table on the anticipated increase of policies due to changes in SB81,
the cost of providing grants to 25 percent of those households, and possible wildfire damages.
County
Current Fair
Plan Policies (2)
Expected
Additional
Policies (3)
Cost of $7,000 Grant to
25% of Population (in
thousands) (4)
Wildfire Event
Damage (in
millions) (5)
Colfax 129 335 $734 $26.70
Lincoln 207 538 $1,177 $39.30
Los Alamos 5 13 $28 $2.50
Mora 38 99 $216 $3.10
Otero 335 871 $1,905 $64.80
Sandoval 122 317 $694 $37.80
Santa Fe 79 205 $449 $37.10
San Miguel 272 707 $1,547 $53.60
Taos 110 286 $626 $41.40
Grant 115 299 $654 $18.90
Rio Arriba 141 367 $802 $38.50
Catron 32 83 $182 $5.30
Total/Average* 1,585 4,121 $9,015.0 $39.8
*Average of Counties with over 50 current policies
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Related to Senate Bill 33 (SB33) which appropriates $20 million from the general fund to the
proposed wildfire prepared fund to make sure to make structures and properties in New Mexico
wildfire prepared. SB33 requires that at least fifty percent of the grant money be awarded to
qualified entities for the purpose of assisting eligible property owners with making the necessary
changes to their primary residences to make them wildfire prepared.
Related to House Bill 175, which amends portions of the Forest and Watershed Restoration Act
to allow the forest land protection revolving fund to be used to create buffers of defensible space
around structures and properties in high-risk areas.
JR/hj/SL2